Wednesday, September 16, 2015

The Dark Side Of Our Hydropower Projects VI

My petition has never been about hydropower projects. It has been about the need and the duty to fulfill the Constitutional requirement to ensure intergenerational equity with respect to our natural and environmental resources. It has been about keeping one river - Chamkhar Chhu, free-flowing for all times to come. It has been about bequeathing the river to the name of the most illustrious of our environmentalists - His Majesty the IVth Druk Gyalpo Jigme Singye Wangchuk. If you believe in the cause, please sign the petition at:

Some truly eloquent and learned Bhutanese experts have recently spoken and written on the economic bonanza that the hydro-power projects mean for Bhutan. This cacophony has been blistering my eardrums since the last four decades. And yet, after all that, we find that we are even more badly off than we were at the point of departure! Still, our experts insist that we must take the phenomenal cost escalations and devastating geological surprises in our stride, because they reason that, it is in the nature of the business. They also reason that the more than Nu. 100 billion hydro-power loans that is in excess of our entire GDP is inconsequential because they say that the hydro-power loans are “self-liquidating”. But for those of you who worry, look at the following:

Bhutan’s hydro-power projects have largely been perceived risk-free, and thus rapid hydro-power investment through heavy borrowing has not caused much concern until recently. Yet available information suggests that the sector’s financial performance has been deteriorating since 2007. The net profit (before tax) per unit of electricity sold has fallen sharply since 2007, driven by rising costs and declining revenue. The sector’s regular contribution to the budget has also declined for the past 10 years, from 6-8 percent of GDP during the early 2000s to 2.7 percent in 2011/12, notwithstanding the significantly increased electricity generation capacity. All this indicates that the sector’s “high commercial profitability” cannot be taken for granted. Should the hydropower sector’s financial performance continue to deteriorate, Bhutan’s solvency could be threatened. Although debt service costs are being borne by DGPC at present, after all, the hydropower debt is the government’s liabilities. The source of the performance deterioration has to be identified, and, remedial actions taken soon to avoid debt service difficulties.

Economic Policy and Debt Department

The World Bank

From the above, you can see that even the World Bank worries about our capacity to remain solvent, should our hydro-powers fail. This should be warning enough to convince us to go slow on our hydro-power projects, or face the consequences.

A report called, ‘The New Debt Trap’ released by the Jubilee Debt Campaign, a UK-based company has categorized Bhutan as a country with ‘high risk of government debt crisis’. The report lists Bhutan among 14 other nations that are fast heading towards a debt crisis.

TheBhutanese newspaper reported that Tata Power Trading Company (TPTC has a 15 years agreement with the Dagachhu Project to sell its electricity in India) was facing problems selling Dagachhu electricity at Nu. 2.90 in India. As opposed to that, according to Kuensel report, the cost of generation at the Punasangchhu has already touched Nu.4.00 per unit at 2017 figures. The project completion date has recently been pushed back to 2019 - meaning the cost will go up further.